Convergence in Banking Efficiency Across European Countries

Laurent Weill

Working Papers of LaRGE Research Center from Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg

Abstract: Since the preparation of the Single Market program in the 80s, financial integration in Europe has been expected to provide gains in growth by favoring competition and efficiency on financial markets. Our paper aims to check whether financial integration has taken place on the banking markets, by investigating the convergence in banking efficiency for European Union countries. We measure cost efficiency of banks from 10 EU countries between 1994 and 2005 with the stochastic frontier approach. Our work then constitutes the first one to apply tests of β and σ convergence specified for panel data on banking efficiency measures. We provide evidence of cross-country differences in cost efficiency and of an improvement in cost efficiency for all EU countries. Tests of convergence support the view of a process in convergence in cost efficiency between EU countries. Robustness checks with alternative specifications confirm these findings. These results support the view that financial integration has taken place on the EU banking markets in the recent years.

Keywords: Banking; convergence; efficiency; European integration; stochastic frontier approach. (search for similar items in EconPapers)
JEL-codes: D21 F36 G21 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-ban, nep-eec, nep-eff and nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Journal Article: Convergence in banking efficiency across European countries (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:lar:wpaper:2008-07

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